China's new energy vehicle subsidy continuation policy officially landed; industry insiders generally believe that this policy is a major boon to industry development.
On April 23, China's Ministry of Finance and other four departments jointly issued the "Notice on improving the promotion and application of new energy vehicles financial subsidy policy".
The Notice proposes to extend the period of implementation of the policy of promoting and applying financial subsidies for new energy vehicles to the end of 2022, with the subsidy standard for 2020-2022 sliding back 10 percent, 20 percent, and 30 percent, respectively, from the previous year.
The above subsidy policy will be implemented from 23 April 2020, with a transitional period from now until 22 July 2020.
The biggest difference between the 2020 subsidy policy and the previous one is that for the first time, it stipulates that no subsidy is available for sales above 300,000 yuan after the transition period.
In addition, the Notification also sets a cap on the number of subsidized vehicles at 2 million per year and also raises the mileage threshold for subsidized vehicles from 250 km to 300 km.
Cui Dongshu, secretary-general of the China Passenger Vehicle Joint Conference, said the policy is a major boon to the development of new energy vehicles, with new energy vehicle sales expected to challenge expectations of 1.6 million units this year.
Subsidy smoothly retreat
The Notification finalized the rates of subsidies for the period 2020-2022 at 10 percent, 20 percent and 30 percent respectively from the previous year. Compared to the average 50 percent regression in the 2019 new energy vehicle subsidy rate on a 2018 basis, this subsidy regression was very smooth.
In this regard, Cui Dongshu said, such a retreat rhythm is significant, but also reflects the country's support for the sustainable development of new energy vehicles in 2020 resolute attitude.
The policy is a major boon to the development of new energy vehicles, this year's new energy vehicle sales are expected to challenge the expectations of 1.6 million units.
Dongwu Securities said the 2020 subsidy package landed slightly ahead of expectations and will strengthen demand certainty across the industry, which in turn boosts confidence in downstream production expansion.
The Ministry of Finance issued an official interpretation of the Notice, said China's new energy vehicle development started early and off to a good start, but there are still some practical difficulties, new energy vehicle costs are still high, difficult to compete with traditional cars.
Continued support is needed to consolidate and expand hard-won development gains. The extension of the subsidy support policy is conducive to hedging the impact of the epidemic, promoting consumption in the automobile market, improving overall competitiveness and promoting high-quality industrial development.
Raising energy consumption, mileage thresholds
The smooth retreat of subsidies is also reflected in the appropriate optimization of the requirements of technical indicators.
The Notice shows that in 2020, no adjustment will be made to technical indicators such as the energy density of power cell systems, moderate increase in energy consumption of whole vehicles of new energy vehicles, pure electric passenger cars, pure electric renewal mileage threshold (250km to 300km), 2021-2022, in principle, to maintain the overall stability of technical indicators.
In this regard, the official interpretation of the Ministry of Finance said that, at present, the new energy vehicle product technology has entered a stage of steady improvement, enhance the power battery system energy density and other indicators and product safety contradictions have appeared.
To this end, the four ministries and commissions, in accordance with the principles of technological advancement, quality reliability, and safety assurance, maintain the overall stability of the technical indicator system, give enterprises a stable expectation, and promote enterprises to further improve the technical level and safety reliability of products.
Cui Dongshu said that the technical standards of new energy vehicles should be determined by the market, not simply by subsidies, the actual market competition standards for new energy vehicles in the future, especially battery energy density should have room for improvement.
300,000 price threshold set for the first time
It is noteworthy that the New Deal on Subsidies has set a price threshold for subsidies for the first time.
Notice" shows that the new energy passenger car subsidy before the selling price shall be less than 300,000 yuan (including 300,000 yuan), in order to encourage the development of a "power-for" new business model, accelerate the promotion of new energy vehicles, "power-for" vehicles are not subject to this provision.
At present, the main domestic car companies pushing for electricity replacement are BAIC New Energy and Nio, of which the only Nio priced at more than 300,000, many views, therefore, believe that the subsidy New Deal gives Nio immunity.
Nio related people told surging news reporter, "notice" to do this provision is the state to the power exchange mode of recognition, to the car electric separation of road affirmation, is the electric car industry further development of the major good, an electric car in the experience and fuel car in the positive competition to open the curtain.
The setting of a 300,000-subsidy price threshold has generated much discussion.
There are naysayers like Li Auto CEO Li, who tweeted, "The 300,000 threshold is estimated to be designed to restrict Tesla but gives Tesla the reason and necessity to lower the price, the standard version can pull the price up to 300,000, more than 270,000 after subsidy. The final subsidy also went to Tesla, and the price drop would in turn hit the 200,000-400,000 priced Chinese-made cars."
There are also supporters, said Cui Dongshu, who said that setting a 300,000 price threshold is a good oriented policy.
"The first is to improve the efficiency of subsidies by subsidizing mainstream products and reducing subsidies for luxury high premium products. At the same time, it is conducive to the improvement of the price competitiveness of new energy vehicles and the realization of the integration with the traditional car price system. Ultimately boosting the rate of replacement of conventional fuel vehicles by new energy vehicles and accelerating the increase in penetration of new energy vehicles."
Wang Yao, assistant secretary-general and head of the technical department of the China Association of Automobile Manufacturers, also expressed support, saying that setting a ceiling on the price of subsidized new energy vehicles is a scientific and reasonable choice, taking into account factors such as the purchase level of Chinese consumers and industrial development, and avoiding the flow of subsidized funds to luxury consumption.
In addition, other countries in the international new energy subsidy policy also have similar provisions, such as Germany's new energy vehicle subsidy policy also explicitly provides that electric vehicles priced above 60,000 euros will not be subsidized.
Therefore, the notice clearly proposed in the new energy subsidies before the sale price does not exceed 300,000 policy provisions, is a combination of the development of new energy vehicles in China's current situation and the experience of other national policies, a comprehensive proposed, in line with the development of new energy vehicles in China's strategic orientation.
For setting the price threshold, the official interpretation of the Ministry of Finance said, drawing on the United States, Germany, Britain, France, and other countries, in order to avoid a large flow of subsidized funds to luxury consumption, comprehensive consideration of China's consumer purchasing power level, industrial development, and other factors and require subsidized selling price.
The Ministry of Finance also said that in the specific implementation process, the four ministries will use as a reference basis information such as the combined price and tax amount of the uniform invoice for the sale of motor vehicles, as well as the official guide price of the product.
The relevant departments will include this in the scope of the new energy vehicle subsidy liquidation verification, the existence of non-compliant operations to obtain subsidies for enterprises will be seriously dealt with in accordance with the relevant provisions.
Annual subsidy ceiling of 2 million vehicles
It is noteworthy that the Notice also proposes an annual subsidy size cap of approximately 2 million vehicles in principle.
In response, the Ministry of Finance interpreted that 2 million represents about 8% of China's total annual car sales. Capping the size of subsidies is a common international practice.
The U.S. federal government mandates that consumers no longer take advantage of the personal tax credit after the completion of a one-year rollback for companies with cumulative sales of more than 200,000 vehicles.
The United Kingdom, Germany, and the United States of America have capped the total size of subsidy funds and adopted a first-come, first-served system.
By 2022, the scale efficiency of the new energy automobile industry will be further enhanced, the comprehensive price/performance ratio of products will be further enhanced, coupled with effective non-subsidy policies, the industry can gradually and smoothly transition to market development.
Operationally, according to the new energy vehicle licensing data, in the annual sales of nearly 2 million vehicles, the four ministries will issue a notice in advance, clear subsidy standard adjustment point. At the same time, allow a transition period for businesses to ensure a smooth market.
Tesla price hike.
The day after the Notice was released, Tesla's official website showed that the final purchase price of the Chinese-made Model 3 standard range upgrade rose 4,500 yuan from 299,050 yuan to 303,550 yuan.
The final purchase price of the Chinese-made Model 3 Long Range Edition rose 5,000 yuan from 339,050 yuan to 344,050 million yuan.
In response, Tesla salespeople said that consumers ended up buying more because the amount of the subsidy was reduced under the latest subsidy policy.
Unlike Tesla's immediate price increase, which allowed consumers to bear the "loss" caused by the reduction of subsidies, many car companies openly stated that they would bear the difference between the reduction of subsidies.
Nio said that users who commit to a car before May 31, 2020, will be entitled to a subsidy at the 2019 state rate, with the difference being borne by Nio. (Subsidies down 2000-7000 yuan)
Mercedes also said that from April 24 to June 30, the original subsidy of 16,000 yuan will continue to be available for the purchase of an electric vehicle EQC (manufacturer's guide price from 579,800 yuan).
Li Xiang said on Weibo, "Prospective consumers of the Li Auto cars do not have to worry, we bear the part of the subsidy decline, the user to hand price remains unchanged."
It seems that Tesla has temporarily "increased the price", but there are many views that Tesla will reduce its price before July 22 to continue to enjoy subsidies.
CITIC Securities said the new energy vehicle subsidy policy is in line with expectations and is expected to pull China's manufacturing Tesla to cut prices and volume.
Xpeng Motors founder He Xiaopeng believes: "I judge the probability that within a year the China-made model3 long-range version of the subsidized price will be reduced to 277,500 yuan, down 61,500 yuan from the current price of 339,000 yuan. at this price, the original 150,000-400,000 priced electric car competition pressure will only be significantly increased, will not shrink, everyone should be prepared. But it's good for the customer and good for the market cake. "
